Debt Review

You’re A-Z guide to debt review in South Africa

Debt review is a legal process by which over-indebted consumers can restructure their debts to make them easier to manage and avoid legal action.

What is debt review in a nutshell?

Debt review is a process that aims to help individuals who are struggling with debt. It involves a debt counsellor assessing the individual's financial situation and negotiating with creditors on their behalf. The goal is to develop a manageable repayment plan and prevent legal action against the individual.

But, let’s take a closer look.

Debt review is a process that aims to help people who are struggling with debt. It is designed to provide a structured approach to managing debt, which can help individuals regain control of their finances.

The process starts with an assessment of your financial situation by a registered debt counsellor. The counsellor will review your income, expenses, and debts, and use this information to develop a budget and repayment plan that's affordable for the individual.

The debt counsellor will then negotiate with your creditors on their behalf to try and reach an agreement on the repayment plan. This may involve negotiating a lower interest rate or a longer repayment period, depending on your circumstances.

Once the repayment plan has been agreed upon, the individual will make a single monthly payment to the debt counsellor, who will then distribute the funds to the creditors according to the repayment plan.

During the debt review process, creditors are not allowed to take legal action against the individual, which provides protection for the individual from being declared bankrupt or having their assets repossessed.

Is debt review right for you?

While the answer to this will depend on your individual circumstances, we’ve put together a list of 10 signs that this may just be the right financial move.

Here are ten signs that debt review may be right for you:

1. Struggling to keep up with your debt repayments, and you're not sure how to get back on track?
2. Receiving multiple calls or letters from creditors demanding payment?
3. Considering taking out more loans or credit cards to pay off your existing debts?
4. Have little or no money left over after paying your debts each month, making it difficult to cover essential living expenses?
5. Worried about legal action being taken against you by your creditors?
6. Receiving notices of default or summons from your creditors?
7. Dipping into your savings or retirement funds to pay your debts?
8. Experiencing anxiety or stress due to your debt situation?
9. Being threatened with repossession of your assets, such as your car or home?
10. Feel like you are in a cycle of debt and are unsure how to break free from it?

How long does the debt review process take?

The debt review process typically takes between three to five years to complete, and once all debts have been repaid, the individual will be issued with a clearance certificate. This certificate confirms that the individual has fulfilled their obligations under the repayment plan, and can be used as proof that the individual is no longer under debt review.

Who regulates debt review in South Africa?

Debt review in South Africa is overseen by a government agency called the National Credit Regulator (NCR). The NCR was established under the National Credit Act of 2005, with the purpose of regulating the credit industry and protecting consumers from unfair practices.

If you're unfamiliar with the concept of debt review, it involves a qualified debt counsellor assessing an individual's financial situation and negotiating with their creditors on their behalf. The aim is to create a manageable repayment plan that the individual can afford, while also preventing legal action from being taken against them.

To ensure that consumers are protected and treated fairly during the debt review process, the NCR has set out strict rules and guidelines for debt counsellors to follow. These rules and guidelines are regularly reviewed and updated to reflect changes in the industry and to protect consumers from new types of unfair practices.

What if you’re not happy with your debt counsellor?

If you have any concerns or complaints about your debt counsellor, you can contact the NCR, who have the power to investigate and take action against any violations of their rules and guidelines. Overall, the NCR plays an important role in ensuring that debt review in South Africa is a fair and transparent process for everyone involved.

Which loans and debts will be restructured?

1. Credit card debt
2. Personal loans
3. Store accounts
4. Vehicle finance
5. Home loans
6. Overdrafts
7. Student loans
8. Medical bills
9. Tax debts
10. Garnishee orders (an order for a portion of a person's salary to be paid to a creditor)

Is there a maximum and minimum debt review amount?

There's no minimum or maximum debt amount required to qualify for debt review in South Africa. However, the National Credit Regulator (NCR) states that debt review is typically suitable for individuals who are over-indebted, which means they are struggling to meet their debt repayments.

If an individual applies for debt review and is found to be over-indebted, the debt counsellor will work with them to come up with a repayment plan that is affordable and takes into account all of their debts and expenses.

Eligibility requirements for debt review in South Africa

1. Be a natural person (i.e. an individual, not a company or other legal entity).
2. Earning a regular income or have the means to make regular payments towards your debts.
3. Be struggling to make your debt repayments, or are likely to struggle in the near future.
4. You must have at least one debt, but there is no minimum or maximum debt amount required to qualify.
5. Not have been declared insolvent or sequestrated.
6. Not have applied for debt review in the past six months (unless there has been a change in your financial circumstances since then).
7. Be willing to work with a debt counsellor to develop a repayment plan and make regular payments towards your debts.
8. Be willing to have your credit record affected while under debt review, and understand that your credit record will only be cleared once you have completed the process and paid off your debts.

Now that we’ve covered the ins and out of debt review in South Africa it’s time to take a closer look at applying as well as the entire process from start to finish.

The debt review process in South Africa typically involves the following steps:

1. Application: The first step is to apply for debt review with a registered debt counsellor. This can be done in person, over the phone, or online.
2. Assessment: The debt counsellor will assess your financial situation by reviewing your income, expenses, and debts. They will also check your credit record to ensure that you qualify for debt review.
3. Notification: Once the debt counsellor has assessed your situation, they will notify your creditors and the credit bureaus that you have applied for debt review. This will prevent your creditors from taking legal action against you, such as issuing a summons or garnishee order.
4. Repayment plan: The debt counsellor will work with you to develop a repayment plan that is affordable and takes into account all of your debts and expenses. They will negotiate with your creditors to reduce your monthly payments and interest rates.
5. Court application: If your creditors do not accept the proposed repayment plan, the debt counsellor may need to apply to the court for a debt restructuring order. This will legally enforce the repayment plan and prevent your creditors from taking legal action against you.
6. Payment: Once the repayment plan has been agreed upon, you will make a single monthly payment to a payment distribution agency (PDA). The PDA will distribute the funds to your creditors according to the repayment plan.
7. Clearance certificate: Once you have paid off all your debts, the debt counsellor will issue a clearance certificate. This will be sent to your creditors and the credit bureaus, and your credit record will be cleared.

Choosing a debt review company

Here are five of the biggest debt review companies in South Africa, based on their market share and reputation:

1. Debt Rescue: Debt Rescue is one of the largest debt counselling companies in South Africa. They have helped over 30,000 clients become debt-free since their inception in 2008.
2. DebtBusters: DebtBusters is a leading debt counselling company that has been in operation since 2007. They have helped over 20,000 South Africans become debt-free and offer a range of debt counselling and debt management services.
3. National Debt Advisors: National Debt Advisors is a debt counselling company that has been operating since 2012. They offer a range of debt counselling and debt management services, including debt review and debt consolidation.
4. Credit Matters: Credit Matters is a debt counselling and debt management company that has been operating since 2006. They offer a range of services, including debt review, debt consolidation, and debt mediation.
5. Debt Wise: Debt Wise is a debt counselling company that has been in operation since 2007. They offer a range of debt counselling and debt management services, including debt review and debt consolidation.

Frequently asked questions about debt review 

Q: Can I apply for debt review if I am unemployed?
A: Yes, you can apply for debt review even if you are unemployed, as long as you have a source of income or can show that you will be able to make regular payments towards your debts.

Q: Will my credit record be affected if I go under debt review?
A: Yes, your credit record will be affected while you are under debt review. However, once you have completed the process and paid off your debts, your credit record will be cleared.

Q: How long does the debt review process take?
A: The debt review process can take up to five years, depending on the individual's financial situation and the repayment plan that is agreed upon.

Q: Can I apply for debt review if I am under debt counselling or debt management already?
A: Yes, you can still apply for debt review even if you are already under debt counselling or debt management. However, it is important to note that your debt counsellor or debt management company must be informed of your decision to apply for debt review.

Q: Can I still use my credit cards while under debt review?
A: No, you are not allowed to use your credit cards while under debt review. This is to prevent you from accumulating more debt and to ensure that you stick to your repayment plan.

Q: Can my creditors still take legal action against me if I am under debt review?
A: No, once you have applied for debt review, your creditors are not allowed to take legal action against you. This is a provision under the National Credit Act.

Q: How much does debt review cost?
A: The cost of debt review varies depending on the individual's financial situation and the debt counsellor they choose to work with. However, debt counsellors are required to charge a fee that is in line with the National Credit Regulator's guidelines.

Q: Can I withdraw from debt review if I change my mind?
A: Yes, you can withdraw from debt review at any time. However, it is important to note that your creditors may then take legal action against you.

Q: Will debt review affect my spouse or partner's credit record?
A: No, debt review will only affect the credit record of the individual who has applied for it. However, if the individual has joint debts with their spouse or partner, those debts will also be included in the debt review process.

Q: Will I be able to get credit again after I complete debt review?
A: Yes, you will be able to get credit again after you have completed debt review. However, it may take some time to rebuild your credit record and your options for credit may be limited at first.

What’s the difference between debt review and debt intervention?

Debt review and debt intervention are both legal processes for restructuring debt, but they differ in their eligibility requirements and the scope of debt they address.

Debt review is available to individuals with any amount of debt, while debt intervention is only available to those with no more than R50,000 of unsecured debt and an average monthly income of no more than R7,500 over the preceding six months.

Debt review aims to restructure a consumer's debt over a period of up to five years, while debt intervention provides the option of extinguishing debt, but only after a lengthy suspension and reassessment period.

Overall, debt review is a broader process aimed at helping individuals restructure their debt, while debt intervention is a more limited program available to those with very specific financial circumstances.

Let’s take a closer look at debt intervention

The Credit Amendment Act also introduced debt intervention, which serves as an alternative to debt review for those with very low income, and is informally known as "the poor man's debt review".

To qualify for debt intervention, an individual must have an income that is insufficient to cover their debts, have unsecured debt that is no more than R50,000, and an average income over the preceding six months that did not exceed R7,500.

Companies cannot use the debt intervention programme, and anyone who is currently under Administration or Sequestration is not eligible. While debts are suspended for a period of 24 months, the debtor cannot apply for any loans and, if their debts are extinguished, they may not take out any credit for a period of 6 to 12 months.